Tax Debt Resolution When You Can Pay in Full

Last updated on December 6, 2022

Taxpayers that have the financial capability to pay the entire amount their tax debt should not apply for tax reduction plans such as Offer in Compromise or Partial Payment Installment Agreement. They must consider whether they can pay the entire amount in a single payment or prefer to pay it in installments.

The advantage of paying in full in a single payment is that there will be less penalties and interest to pay. This is because the IRS continues to charge interest and penalties on any amount of tax debt that is yet to be paid even if a taxpayer has begun to pay the debt amount in installments.

Paying the full tax debt in installments using IRS payment plans such as a Streamlined Installment Agreement is more costly because of the penalties and interest that are charged on the tax debt amount that remains to be paid. Taxpayers should only explore an installment agreement if they are unable to pay the entire amount in one payment.

There are many kinds of Installment Agreements depending on the tax debt amount. Those who do not have the financial strength to pay the full tax debt can explore Partial Payment Installment Agreement, the tax debt payment plan that allows a reduction in tax debt.